Related papers: Empirical asset pricing with nonlinear risk premia
This work aims at making a comprehensive contribution in the general area of parametric inference for discretely observed diffusion processes. Established approaches for likelihood-based estimation invoke a time-discretisation scheme for…
We study a risk-sharing economy where an arbitrary number of heterogenous agents trades an arbitrary number of risky assets subject to quadratic transaction costs. For linear state dynamics, the forward-backward stochastic differential…
We consider discrete time models for asset prices with a stationary volatility process. We aim at estimating the multivariate density of this process at a set of consecutive time instants. A Fourier type deconvolution kernel density…
Great research efforts have been devoted to exploiting deep neural networks in stock prediction. While long-range dependencies and chaotic property are still two major issues that lower the performance of state-of-the-art deep learning…
This paper studies an asset pricing model in a partially observable market with a large number of heterogeneous agents using the mean field game theory. In this model, we assume that investors can only observe stock prices and must infer…
This paper presents the solution to a European option pricing problem by considering a regime-switching jump diffusion model of the underlying financial asset price dynamics. The regimes are assumed to be the results of an observed pure…
The Constant Elasticity of Variance (CEV) model is mathematically presented and then used in a Credit-Equity hybrid framework. Next, we propose extensions to the CEV model with default: firstly by adding a stochastic volatility diffusion…
Options with maturities below one week, hereafter "ultra-short-term" options, have seen a sharp increase in trading activity in recent years. Yet, these instruments are difficult to price jointly using classical pricing models due to the…
This paper examines the valuation and hedging of standard equity protection swap (EPS) products proposed by Xu et al.. To account for financial crises and counterparty default risk, we develop pricing frameworks based on Merton's…
The presence of non linear instruments is responsible for the emergence of non Gaussian features in the price changes distribution of realistic portfolios, even for Normally distributed risk factors. This is especially true for the…
We investigate entropy as a financial risk measure. Entropy explains the equity premium of securities and portfolios in a simpler way and, at the same time, with higher explanatory power than the beta parameter of the capital asset pricing…
Accurate volatility forecasts are vital in modern finance for risk management, portfolio allocation, and strategic decision-making. However, existing methods face key limitations. Fully multivariate models, while comprehensive, are…
We describe the pricing and hedging of financial options without the use of probability using rough paths. By encoding the volatility of assets in an enhancement of the price trajectory, we give a pathwise presentation of the replication of…
We study the approximation of certain stochastic integrals with respect to a d-dimensional diffusion by corresponding stochastic integrals with piece-wise constant integrands. In finance this corresponds to replacing a continuously adjusted…
We propose a stochastic volatility model for time series of curves. It is motivated by dynamics of intraday price curves that exhibit both between days dependence and intraday price evolution. The curves are suitably normalized to…
We price and replicate a variety of claims written on the log price $X$ and quadratic variation $[X]$ of a risky asset, modeled as a positive semimartingale, subject to stochastic volatility and jumps. The pricing and hedging formulas do…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
This thesis develops a new framework for modelling price processes in finance, such as an equity price or foreign exchange rate. This can be related to the conventional Ito calculus-based framework through the time integral of a price's…
We develop a methodology for index tracking and risk exposure control using financial derivatives. Under a continuous-time diffusion framework for price evolution, we present a pathwise approach to construct dynamic portfolios of…
Measuring model risk is required by regulators on financial and insurance markets. We separate model risk into parameter estimation risk and model specification risk, and we propose expected shortfall type model risk measures applied to…